Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor at Peking University HSBC Business School and at the University of Hong Kong's Faculty of Business and Economics.

Gamesmith94134: Quitting the Quota
I thought Mr. Sheng was complaining the current of the hot cash was so strong that “quitting the quota” was an alternative to halt inflation and inequality in the micro economic model. Luckily, I appreciate Mr. Alton Cheung gave me the different look on the IV therapy. Did Mr. Sheng confused of the dark matter inside of the horn? If the asset class capital is intruded by the low cost of RMB that he assume China should make it compatible to OCED to survive; then I think the elephant is not piece of rope nor a wall.
Perhaps, I read on the restrictions and demands on the asset class capital; and the locals are not yielding on profitability. Over the years I returned to China, I saw bicycles disappeared and reappeared in the metros, why should China build more prestige village for the wealthy? If the SOE is competing with the foreigner in occupying the valuable properties; why can’t China subsidize the lesser wealthy one to own one if they are not catching on with its prices? We, American have policy in provision on the elderly to live in the fancy one and we do not fend off building to be prestige and they became cheaper; and I thought China was tough enough to say “NO”. Why should Beijing or Hong Kong fear of the smog?
If transportation is not a problem for China to implement its policy; it is time for the non-resident workers in the metro to go home where the Politburos can guarantee a livelihood for them. Mr. Sheng, why should you fidget with the interest rate if the others are relatively low? Or compensate those seeking on the profitable if the 2013 is uncertain in term of the currency war?
I would suggest the case of “Khodorkovsky worked his way up the Communist apparatus during the Soviet years, and began several businesses during the era of glasnost and perestroika. After the dissolution of the Soviet Union, he accumulated wealth through the development of Siberian oil fields as the head of Yukos, one of the largest Russian companies to emerge from the privatization of state assets during the 1990s”in the example on the transformation.
Quitting the quota does not work; and SOE’s are not benefiting of the lower rate, and SME’s will suffer more. I emphasized my suspicion the BRICS is contaminated with the current and influenced by the global macroeconomic policy; that, oblivion of domestic measures through the micro economic principle are not adequately executed. Eventually, the boom becomes the shift on the politics that inequality turned many economists into drunken sailors after the change of attitudes of their politicians. Take the case of Libor and EU. Then, my statement in the status quo is doomed to a diminishing return and depression is not far away even for China.
Finally, Currency is the margin of affordability that required its citizens to support and defy; that economists must yield or examine well just before advise on it politicians to pursuit its goal. Harmony is the name of the game; why is BRICS is compatible to OCED? Citizen to the world just make me laugh. Hang on, we do need a global financial reform; don’t bet on the chips till you are at the table.
May the Buddha bless you?

I don't see it as a form of "financial repression" either. This article only tells half the story.

The issue is not so much about low nominal interest rate; rather, it is about China's reaction to the global crisis with its dual-track and state heavy system. Inequality happens because increasing money supply and lowering interest only benefited all the SOEs because private SMEs cannot get credit from state-owned banks.

Since China is dependent on exports and thus having a low exchange rate and an excessive surplus, inflation is inevitable. If it tries to tighten up money supply and interest rate, its economy will tank immediately as we have seen during 2011-2012. One of the many problem with this policy is that most Chinese producers are already having excessive capacities, and Chinese still do not have enough purchasing power, so the best way to use the cheap loans is to invest in real estate. Then this would mean only the people who are able to receive the cheap loans, i.e. rich people, will be able to own real property. The article is kind of right on this.

Then it went off track for its conclusion. The problem is not low borrowing cost. Rather, it is the dependence on export and its its inability to raise purchasing power: the low borrowing cost is merely the IV therapy for its export sector.

The last quarter has shown PPI at 2.2% and CPI at 2%, which makes interest rates balance the inflation; do not see how one can surmise that cost of capital is out of sync with inflation.

What China has shown is that central planning even in a capitalist economy can deliver results what 'the market clearing mechanism' is supposed to do, although it would be naive to imagine that the latter is completely absent in China.

I'm surprised by the usage of "financial repression" in this article. The term is familiar from Keynesian literature, but it usually refers to interest rates which are lower than inflation. And it doesn't promote inequality, but rather is part of "euthanasia of the rentiers."

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